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“SOS! The Ukrainian Public Healthcare System is Crumbling!” – The Disaster of Financing Public Healthcare in Ukraine

“SOS” stands for “save our souls,” which is very much a real topic of current interest since public healthcare in Ukraine will surely not offer much to save the physical health of our bodies. As Ukraine makes impressive progress in IT services and the agricultural, defence, and aerospace industries, one crucial sector in the country’s economy continues to lag behind – healthcare. For instance, as a part of the global response to the COVID-19 pandemic, the Ukrainian government undertook a count of artificial breathing machines and, in the Kharkiv region, one of the biggest regions in the country, the number of ventilators in public hospitals barely reached 20. The result disclosed the deficient system of corrupt tender acquisition in Ukraine, whereby the government purchases equipment from the supplier that can offer the biggest bribe. No ventilator-producing supplier offered a worthy bribe, and no ventilators were purchased for public hospitals.

As with everywhere in the world, the doctors treating COVID-19 patients constantly report a lack of drugs and protective equipment. However, it is Ukraine that scores high in the exposure of medical staff to the coronavirus – more than 15,566 healthcare workers have tested positive since March. The number represents approximately 8.5% of all cases of COVID-19 in Ukraine as of September 2020. In Italy, one of the worst hit countries in the world where the number of cases is double of that in Ukraine, the percentage of cases among medical staff is comparable to Ukraine – 10.5% out of all cases. The Ukrainian government offers reimbursement to medical staff amounting to $360 USD. In turn, according to the WHO brief “Ukraine: Can people afford to pay for medical care?”, the treatment of COVID-19 in Ukraine costs a minimum of $900 … But this article does not seek to criticise, but to investigate – what are the main issues in the Ukrainian healthcare system? And, most importantly, what can we do to facilitate positive change in the public medical services of the country?

When we hear about public healthcare from Ukrainian media outlets, it is usually discussed in terms of the big Healthcare Reform undergoing since 2015. The reform aims to fight corruption, provide access to free healthcare, high-quality equipment, drugs, and retain exceptional specialists of the best academic qualifications and highest moral virtues. Do these promises sound “Bernie Sanders”-like yet? Unfortunately, if such utopian views sound silly in the USA, where an average nurse and surgeon annually earns $72,000 and $400,000 USD, respectively, then these aspirations are simply a fairy tale in Ukraine, where an average nurse and surgeon annually earns $1,500 and $2,600 USD, respectively.

In Belgium, another country like Ukraine, with mainly public healthcare, salaries of healthcare workers are comparable to the ones in the USA. Apart from investing in comprehensive, high-quality education, both EU members and the USA ensure their healthcare professionals are well reimbursed and, therefore, their medical system attracts the brightest talent that is motivated to perform well and is discouraged from participating in corrupt activities. Two such simple steps are what Ukraine should learn and apply at the core of its healthcare reform in the first place.

For years, Ukraine’s education system has been struggling to produce enough highly-qualified medical specialists. First of all, the issue comes from disincentivizing youth with the perspective of 10 years of complex educational processes that will ultimately constitute an expensive price one has to pay to be placed in an entry-level position in healthcare – a medical internship. According to the graduates of the Kyiv Medical University Class of 2020, placement as an intern in a desirable gynaecological department can cost a student as much as a bribe worth $40,000. Second, a low paid position at a public clinic most likely awaits a young professional at the end of his or her studies. Interns participating in the treatment of COVID-19 are promised a 50% pay raise. But the bonus pay affects only the hours of an intern’s shift and not the fixed pay. Currently, a regular hourly rate for an intern in a cardiology department is 12 hryvnia, or $0,43 USD per hour. The 50% increase in this rate will hardly compensate neither for years of hard work as a student nor for the risk of being infected with the coronavirus. Such a lack of incentive for young talent ultimately results in extremely low numbers of experienced specialists trained in the field. The statistics of WHO are brutal: medical professionals retire faster than the new generation of professionals is being trained to take over the demand for healthcare services. The situation needs urgent fixing – the adoption of the European system of incentivising scholarships and decent pay for young doctors should become common practice.

However, the major flaw of the Ukrainian public medical system is the approach of the government. After all, hiding the symptoms of the issue instead of facilitating the fundamental change to the system itself is a typical approach of corrupt governments to policy making. Instead of trying to eliminate inefficiency and corruption at the surface – among healthcare workers, policy makers should first of all address the issue at the root – among the corrupt government bodies. Although the issue of corruption, populism, and dependence on oligarchs are the homeostatic processes the Ukrainian governmental bodies depend on, one aspect that can be altered for a better functioning healthcare system is a mechanism financing public healthcare.

What truly makes healthcare services financially solvent is the way a government conducts its cost accounting. A cost accounting system is a system for recording, analysing, and allocating the correct cost to the individual services provided to patients (for instance, drugs, procedures, tests, room and board, etc.). Organisations without a cost accounting system rely on rudimentary methods such as the ratio-of-cost-to-charge. Such a system has been the case in Ukraine for decades, where the thin healthcare budget (historically around 4-5% of GDP) has been spread over hundreds of hospitals and allocated by the number of inpatient beds per hospital. The issue with such a system was an overwhelming number of unnecessary healthcare institutions to budget – the result of a situation, common in Ukraine, when building an extra public clinic or a hospital allows local governments to open a new channel of bribes through overpriced tenders for construction and equipment.

The Ministry of Health of Ukraine states that the key to transforming Ukraine’s healthcare system in the current Reform is the development of the new financing mechanism of the sector – “money follows the patient.” The ministry’s official website explains: “The state will now allocate money for the specific needs of a patient instead of financing hospitals, doctors, and inpatient beds.” The financing of the medical facilities now depends either on the number of contracts patients sign with each doctor, or the historical data on the number of urgent cases per hospital. The good news is, now hospitals will get no financing if there are no patients, which will allow for unnecessary healthcare facilities to naturally dissolve due to low demand for their services leaving space for higher financing of well-functioning medical facilities that are in demand.

However, the issue with the new financing system is that Ukraine currently spends only around 6.9% of its GDP on healthcare, which amounts to $210 of annual healthcare spending per capita in 2019. To answer the question of whether that is enough to ensure the well-being of each Ukrainian in need of healthcare services, let us consider the cost of one of the simplest and most common surgeries – appendectomy, or removal of the appendix due to appendicitis. The total cost of the materials needed for the surgery is a minimum of $730 (labour cost excluded). The $210 the Ukrainian government allocates to each citizen does not cover even such a simple procedure, not to mention another very common surgery, heart bypass surgery (CABG), conducted in case of cardiovascular health issues (ischaemic heart disease, heart attack or stroke, for instance). To put things in perspective, according to WHO, cardiovascular health problems are the most common cause of death in Ukraine and in the world. The cost of materials for such surgery vary from $3,750 to $12,600. The $210 budgeted per citizen is in no way sufficient for ensuring even the most common medical services are provided to each given citizen, even excluding worthy pay for medical staff. In comparison, the annual healthcare spending in the Eurozone amounts to $3,600 per capita on average. Therefore, the percentage of GDP dedicated to healthcare in Ukraine should be greatly increased, but if the budget does not allow it Ukraine should finally abandon the utopian dream of free healthcare and allow hospitals to charge patients for costs of treatment that the government cannot cover.

To conclude, if the Ukrainian government allowed for a more fundamental impact of European integration on the Ukrainian public health system, if international standards were applied not only to the bureaucratic procedures, but to the way the medical workers are reimbursed, to the way the educational and financial mechanisms worked, healthcare services would truly improve in their quality and corruption would see a dramatic slump.

Anna Gubanova, financial management, Vlerick Business School, Brussels

 

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